Business and management

Volkswagen in America

Beetling back to success

VOLKSWAGEN is nothing if not ambitious: its plan is to dethrone Toyota as the world’s biggest carmaker. It has already nosed past rival General Motors and has plenty of momentum in China, the world’s largest car market. But one key country is holding back the German giant: America.

It was not supposed to be this way. A few years ago VW was leading America’s automotive recovery. The firm reported some of its best sales figures since the era of the original Beetle—and said it wanted to sell at least 800,000 vehicles per year in America by 2018.

Then, rather suddenly, things went south. Although Volkswagen of America is still well ahead of where it was before the Great Recession, it has suffered two consecutive years of declining sales. And in the first five months of 2014, as rivals such as GM posted some of their best numbers in a decade, the VW brand’s sales dropped by another 15%.

With sales in America barely above 400,000 in 2013, down 7% from the previous year, doubts have been growing as to whether VW will be able to reach its target of 800,000 by 2018. And Michael Horn, a 25-year VW veteran who recently took over operations in America, concedes that goal is effectively out of reach, at least within the next four years. “We have to be realistic,” he said in a recent interview at the launch of VW’s new Golf hatchback in San Francisco. “The vision is right, but timing is a huge challenge.”

Opinions differ about why VW has lost ground. One reason is hubris, argues Stephanie Brinley of IHS Automotive, a market-research firm. The sales target, she says, was simply too ambitious. More fundamentally, China “took precedent” over America, in the words of an insider. Resources were shifted and models for the American market were delayed. The CrossBlue, a crossover-utility vehicle, for instance, should be in production by now. Mr Horn’s predecessors were counting on it to build momentum; its absence has left a huge hole in VW’s line-up in a market where utility vehicles are still among the biggest sellers. To make matters worse, the launch of the American version of the updated Golf was also delayed.

These problems notwithstanding, the carmaker is still in better shape than it has been in years. Once the dominant brand for imported cars in America, it saw its lead evaporate in the 1970s as drivers abandoned the original Beetle in favor of newer, more fuel-efficient Japanese models. By the early 1990s annual sales had dropped to around 54,000, and VW gave serious thought to abandoning the American market, following other European brands, such as Renault, Peugeot and Fiat. The firm chose to stick it out, but sales rebounded only gradually.

Mr Horn hopes that he will be able to stabilise sales as the new Golf finds its market. He must also keep his fingers crossed that management in Wolfsburg, VW’s global headquarters in Germany, finally moves ahead with the CrossBlue. The original plan was to produce it in VW’s new assembly plant in Chattanooga, Tennessee, but a controversy over unionisation, which the firm’s management supported, may make it reconsider those plans.

Mr Horn, for his part, just wants the new utility vehicles, whether they are built in Tennessee or a plant in Mexico, where the new Golf is now rolling off the assembly line. “We’ll only succeed in America if we build the cars people want here,” he said. Mr Horn has good reasons to be optimistic: Martin Winterkorn, VW’s chief executive, recently acknowledged that the firm cannot take the industry’s top spot if it continues to neglect America.

I had a '00 VW Jetta with a 2.0L gas engine. I had to get rid of it at ~110K miles, and it was the most unreliable car I've ever owned. Everyone I knew with a car like it also had reliability issues. Moreover, the car was under-powered, didn't give great mileage (I was getting ~25 mpg., but my new '12 Camry with a 2.5L engine gets ~30 mpg for the same commute), and also, it was a noisy car.

I thought that German engineering would be something remarkable, but after my friend's experiences and my experiences with VW, I found out that "German Engineering" is just a marketing gimmick.

I'm actually surprised that VW is doing this well in the USA. Their cars are lousy, and the styling (has anyone seen the pedestrian Passat?), and reliability is shoddy.

Why? Because VW stopped making flawlessly engineered and designed German automobiles. Really, that's all one has to do to get U.S. auto buyers to line up outside your showroom. For decades, the corporation owned a sizable segment of the U.S. market that couldn't get enough of German cars. Then VW began churning out unreliable short lived junk that no one wanted: interchangeable design, poorly made and expensive to repair - which VWs need often. Insult to injury was the tie to Porsche whose motto has long been "Excellence is expected".

After the Great Recession, car shoppers want a reliable Toyota Corolla
and not a satellite controlled, high-maintenance, sexy, V-12 supercar-rocketship garage queen with app library, dial-a-scent, and interior casino lighting.
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After a few breakdowns and tows, the greatest luxury is a reliable car.

Like Christianity, I wanted to be a believer in VW. Have a 2007 Rabbit. Love the looks inside and out, good handling and driving. Took good care of it and washed it religiously. Now it has been sitting in my driveway for over 6 months because I cant afford to replace the transmission. As much as I want to stay with VW, its definitely a risk.

I must be the exception then. I've owned nothing but VW/Audi products(8 cars total) for the last 32 years and they've all been incredibly reliable cars, most needing nothing more than routine maintenance for the entire time I've owned them. My current car is a 2010 Jetta Tdi wagon and is quick, quiet, spacious (more cargo room than most small SUVs) and gets over 43mpg. So far 70,000 trouble free miles. My wife's Toyota Matrix on the other hand is a crappy tin box with more squeeks and rattles than any other car I've ever driven.

Guess there must be a lot of people that have not owned a Volkswagen. Having owned 3 in the last ten years , all bought new, they are junk!First was a 2002 beetle, transmission went 3 times the first year, Volkswagen traded assist and i bought a top of the line Passat. It was in service dept 78 days first six months. Everything from headlights catching fire to engine control modules ect.They bought it back as a lemon and i bought 2004 Jetta. Windows fell off track, quality of interior was horrible. Air Conditioner controls worked 1/2 the time.

I am with you, I have owned many VWs over the years, and the only one I was disappointed in was the 2011 Audi A4. Was a great car, but the CVT transmission was just to weird when starting off from a start. My first was a 1988 Fox. 200k later, still had engine compression of a new one. Only one water pump in those miles. Then 1995 Golf, no issues in 75k. The a Mercedes 230K. Within 6 months, stepper motors for AC. Had to pull dash to repair. Then 2000 Beetle Turbo. Only a loose door pin in 60K. Now wife has 2011 VW Golf TDI 47 mpg, great power, No issues at 70k... I don't get it????

Always wear Adidas Athletic Shoes when you drive German cars.
They are German engineered for comfort and long distance running.
And your feet will appreciate them when you have to hike the long distances to the city when your car breaks down.

Highly reliable, simple, and gets 50 mpg - without the complexities of regenerative breaking/electric coupled motors/batteries. And with a diesel engine that runs like new even after 200k miles of service.

I just with VW would offer more of its diesel line-up in the U.S. - particularly its uber-high mileage VW Polos (can get over 60 mpg).

I owned a 2007 Passat. It was an excellent vehicle (it was totalled in a collision in 2013). It was very reliable and not one thing went wrong with it. The VW is actually quite popular is New England. Although I must say I don't like the boring styling of the new Passat and went with an Acura instead.

In case my pseudonym doesn't give it away, I'm an American. One appeal of Volkswagen was always its prevalent manual transmission options. I've been loyal to Volkswagen/Audi but as its manual options decline, my glances toward other manufacturers increase. I can put a VW/Audi in "D" just as easily I can a Toyota or a Ford. The latter two tend to be more affordable.

Interestingly I'm seeing a lot of comments about reliability. Toyota built brand loyalty in my family when my dad's imported Camry from Okinawa later well over 300k miles with minimal maintenance. VW suffers from the same stigma of other Euro imports of being hard to work onand prone to electronic signal issues. My guess is they are no less reliable than any GM, Toyota our Ford today. However they need to change minds. Value and dependability are two things most American salesmen push, and for good reason.
Make cheap and easy to fix electronic goodies that are easily available in the US. maybe even partnering for parts manufacturing for small sensors and motors with domestic brands. But a change of reputation seems warranted.

I live in Marin County, just north of San Francisco. My wife is a long-time Benz loyalist, but was looking for something small as a runabout. When I suggested a Golf, she exclaimed that nobody buys VW cars in Marin because the dealerships are "so crappy; famous for their lousy servicing and chiseling approach to the bill". Maybe VW USA could look at dealer experiences?
She bought a Fiat 500, so go figure...